Observations on Budget 2023

Witten on 25 February 2023

While the climate emergency requires an all of government and whole of society approach, the rakyat do expect government to take a firm lead. We are collectively facing a crisis of our own making which will get progressively worse.

Companies and civil society will do our best – and the efforts of Climate Governance Malaysia with its partners have mobilized many in industry to engage in a multi-stakeholder platform to crowdsource for hyper-localised solutions - but government must make strong statements and show action.

Ad hoc tax incentives to support specific business initiatives undertaken by a few enterprises while important, is not sufficient. As an export-led economy, many businesses and industries stand to lose out to low-emission competitors and, ultimately, to be removed from the global supply chain

Affordable electricity tariffs and fossil fuel – which do not reflect the price of carbon or environmental destruction – is not only subsidizing households but also our exported goods and services to eventual buyers, who have effectively outsourced their carbon and environmental destruction footprint to a country which is neither measuring, managing nor monitoring this.

Prior to the extensive iterative stakeholder consultations needed to consider and implement the raft of policies required for the price of carbon as a negative externality, a simpler and more easily implementable mechanism would be the shadow pricing of the business’ carbon footprint across its entire value chain [Scope 1-3], which would not impact profits or cashflow but would signal whether the reporting entity is able to support and be part of a smooth transition.

Businesses require a clear statement of intent: there is still no declaration of climate ambition more than 2 years after Petronas’ declaration of its target in November 2020. We need to be clearly aligned to targets as informed by science, for example, to a halving of our absolute emissions by 2030, peaking of national emissions by 2025 and to be wholly committed to zero deforestation.

We should also be prepared for a rapid acceleration of climate ambition and climate resilience, coupled with the inevitable policy response which will be required, as the world has already warmed by 1.2^C compared to pre-industrial levels and the UN’s World Meteorological Organisation estimates a more than 50% probability of warming by 1.5^C in the next few years.

For both mitigation efforts and the massive scale of adaptation efforts required, government action needs to be coordinated across many ministries, not just relying on one coordinating ministry, which does not have access to data.

These efforts must include extensive consultation amongst all affected stakeholders and contribute towards institutional memory e.g. all briefings should be recorded, available for review in multiple languages and summarized in writing. Key highlights and decisions of the National Climate Action Council must be communicated publicly. Initial drafts of the Climate Change Act did not involve public consultation and therefore did not benefit from important stakeholder input. There have been no post-COP briefings. Curation of COP pavilion programs should not be limited to sponsors and donors but should reflect a well-crafted and well-defined communication strategy built around updated policy decisions.

We applaud the:

-tax incentives for CCS as a new economic activity.

-UNDP and APPG allocation of RM30 mil to achieve SDGs and hope these projects will be closely monitored to deliver outcomes and impacts.

-National Security Council allocation of RM46.8 mil and NADMA of RM38 mil, and hope that a significant proportion will be used judiciously to increase our climate resilience and improve our ability and capacity to make informed decisions about where households and businesses live, operate and invest. In particular, the rapid development and deployment of a national climate risks dashboard to ensure allocation of capital is informed by robust and comprehensive risk assessment, as this is a well-understood systemic risk to the financial system.

-allocation to/by GLCs who must lead the way in decarbonizing the economy, including RM150m from Khazanah to boost environment-friendly projects including enhancing the integrity of the carbon market and accelerating reforestation.

-RM3bn guaranteed value for the Green Technology Financing Scheme.

-Loan from BNM of RM2bn to support sustainable tech startups/SMEs to implement low carbon practices.

We are concerned that:

-river rehabilitation was allocated only RM10 mil while sewerage non-river & River of Life was allocated RM210 mil, as almost all of our rivers are dangerously contaminated. We hope that this reduction in allocation is correlated with an intended increase [many manifold] of penalties and fines for the pollution of rivers and beaches, including the illegal dumping of rubbish and toxic chemicals.

-Allocations by the Federal government to preserve forests and biodiversity might not be linked to measurable outcomes [e.g. zero deforestation targets, heavy fines and penalties for illegal deforestation and damage to biodiversity, significant premium on assessment rates for de-gazetted forest reserve land, which must follow rigorous and extensive publicly accessible EIA reporting and consultation].

-There is no allocation for those affected by extreme weather events. Science informs us there will be increasingly frequent and more intense extreme weather events including heavy rainfall [rain bombs], land slides, sink holes, extreme heat days; it will be difficult for allocators of capital [investors banker insurers reinsurers] to invest in or to underwrite assets in regions and communities which do not appear able to make a smooth transition, have food security or access healthcare easily during such events. The Budget needs to recognize this and ensure sufficient allocation for those directly affected by these extreme weather events [eg damage to property, loss of lives, suffering from heatstroke] and increase allocations to emergency first responders.

-Allocations for collating data [e.g. geospatial, biodiversity] and identifying regions of high risk [e.g. “landslide hotspots”] will not be made available to the public, leading to damage to property and loss of lives, downgrading of sovereign credit rating while public officers, who might be culpable, may be able to rely on immunity from prosecution.

-EIA reporting will continue to be inaccessible to the public, not made available online for easy access, which heightens the risk that conditions of the report will not be complied with prior to the commencement of the project.

EIA conditions should reflect and be closely aligned to the National Physical Plan and our commitments under the United Nations Convention on Biological Diversity.